Europe's Crypto Market Shifts from Licenses to Compliance as Rules Tighten

Europe's crypto market is shifting from a focus on obtaining licenses to staying compliant under stricter regulations. The Markets in Crypto Assets (MiCA) regime and the UK's proposed FCA rules are increasing ongoing compliance costs for crypto firms, which could lead to consolidation and partnerships with established financial institutions.

The MiCA regime advances regulation beyond basic licensing and into the day-to-day cost of running a supervised business. This is prompting expectations that the next stage for the sector is less about winning licenses and more about consolidation and deeper collaboration between crypto-native companies and established financial institutions.

Simon Schneider, chief executive of Sygnum Europe, believes MiCA's biggest contribution is the legal certainty it gives financial institutions rather than the creation of new license categories alone. He points to Switzerland as a model, saying crypto adoption accelerated among major Swiss banks after distributed ledger technology legislation was introduced, with roughly three-quarters of the country's leading banks now offering digital asset services.

Under MiCA and the UK's proposed FCA rules, stricter controls are being imposed on client asset segregation, trust requirements, and private keys. This could weigh far more heavily on newer crypto businesses than on banks or investment firms that already operate under similar controls, potentially encouraging smaller players to merge or be acquired by traditional firms.